Radical honesty is in your best interest

Do you remember the Miracle on 34th Street customer service phenomenon?

In the 1947 movie, Santa Claus comes to work for Macy's department store, and promptly starts sending Macy's customers to other stores when Macy's prices are higher than those of competitors.

The result? Rather than hurting Macy's sales, this practice draws more and more customers to shop at Macy's, effectively boosting sales and causing competitors to follow suit in sending customers to other stores for cheaper prices.

Why? Why did sending customers to competitors cause Macy's to gain more customers and more sales?

Because customers like honesty. We like people we can trust. When a person (or company) openly admits his weaknesses (like Macy's charging higher prices than a competitor), his listeners believe that he is acting out of their best interests, not his own. The company who practices this becomes known as (to quote Mr. Macy) "the helpful store, the friendly store, the store with a heart." And people like to do business with that kind of company.

Noah J. Goldstein, Steve J. Martin, and Robert Cialdini cite real-life examples of this principle in their book Yes!: 50 Scientifically Proven Ways to Be Persuasive. They quote the U.S. debut of the original Volkswagen Beetle ("Ugly is only skin deep"); Avis rental cars ("Avis. We're #2, but we try harder. When you're not #1, you have to."); and Listerine mouth wash ("Listerine: the taste you hate three times a day." Progressive car insurance proudly advertises its comparisons with competitors - even when competitors' insurance rates are cheaper than Progressives'. Since Progressive began comparing rates, it has continued to grow an average of 17% per year.

What other industries could use this technique to improve customer service? Automakers? Electronics? Universities?

Are you using this principle to better serve your customers? Do your customers know they can trust you?